| Need advice on student loan, buying a car, etc. |
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switters
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| Need advice on student loan, buying a car, etc. |
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I'm 36. Unconventional life, traveled a lot, etc. Recently started new business (Oct '10) and going well, making about $7-8k/mo before tax. Have $75k in savings and about $30k in a money market account. We rent our house, but would like to buy in 2 years or so.
The only debt we have is a $12,000 student loan at 3.3%.
First question: should we pay off the student loan debt, or save the cash for a down payment on a house? We live in a very expensive area so the minimum we'll probably pay for a house is $500k.
Second question. Our 1992 Honda is about to die. Needs a repair that will cost more than it's worth. Want to buy a used car, and would like it to be a fairly nice one that will last a long time. Was thinking of buying a recent model Jetta wagon (baby coming in 3 months) for around $20k - putting $10k down and financing the rest.
Is this nuts in light of the fact that we still have student loan debt and are saving $$ for a house? We do need a car, but I suppose we could spend less by buying an older model. I just want to avoid extra maintenance costs, and, well, truth be told I just want a nicer car this time. We've been driving a beater for a while.
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Wed Apr 27, 2011 7:30 pm |
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oldguy
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quote:
but I suppose we could spend less by buying an older model. I just want to avoid extra maintenance costs
Congratulations on your finances, you are doing well. No, don't prepay the student loan, 3.3% is low, it's a 'keeper'. You don't want to prepay it only to borrow that same money back for a house later at 6%, instead retain the use of your $12k.
It's kinda funny how people will spend $500/m ($6000/yr) to avoid maintenance costs, LOL - what maintenance costs more than $6000? Most people have a list of rationalizations for buying a new car (they hate to admit that it's a 'want') - to be safe for the baby, need reliability for my work, yada. Old cars aren't inherently unsafe/unreliable unless they are allowed to become that way.
BTW, a Jetta is far less reliable than a Honda, you need to check them in Consumer Reports before you make a decison. (What's wrong with the Honda?)
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Wed Apr 27, 2011 8:00 pm |
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switters
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Honda failed smog check twice and needs a new catalytic converter. I've spent $2,500 on it in the last 2 years on various large repairs. The converter will be about $700 - $900 including labor and a few other things. It's also falling apart on the inside, electrical systems (windows, doors) failing, etc.
Good point about the Jettas, although I've heard newer models are more reliable. Of course we don't know that for sure since they're still new! Am also considering Hyundai Elantra Touring which is similar in form to Jetta wagon, gets good reviews, and good reliability ratings. Possibly a Prius.
We've loved our Accord wagon because I'm a surfer and I can throw my boards in the back, we go camping a lot, etc. Nice to have that extra space. Most wagons that are 5 years or so old are in the $15k range.
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Wed Apr 27, 2011 8:21 pm |
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littleroc02us
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Depends where your priorities sit. Do you want a nicer car and eventually pay on the loans and then push out the savings for a DP on a house? Or would you rather buy a 10k 3 year old, low milaege car for cash and pay off the school loans and wait a little longer to save up for a DP? IMO, I would do number 2 because you have 100k in savings which you could easily pay off the 12k of student loan debt, buy a 10k used car (I bought a 2007 Mitsubishi Galant with 49k and a 60 mile warranty for 10k back in 2009) and then you still have 78k to start a down payment. In fact if you save for 6 more months couldn't you have 100k to use as a DP. So really what's the problem? 
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Wed Apr 27, 2011 8:26 pm |
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littleroc02us
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New vehicles aren't always better. I bought a brand new Dodge Ram back in 2001. It was the biggest piece of junk of all time. I had 3 transmissions replaced, 2 under warranty and one out. My used Mitsubishi has been a wonderful car and is rated one of the safest cars on the road.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Wed Apr 27, 2011 8:29 pm |
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switters
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Don't want a new vehicle, just was thinking a newer model used. Would greatly prefer a wagon for reasons mentioned above. 5 year old wagons seem to be in the $15k range (Subaru, VW, etc.).
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Wed Apr 27, 2011 9:08 pm |
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oldguy
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quote:
(Subaru, VW, etc.)
Probably my engineering background - but those are at the opposite end of the reliability spectrum. The japanese cars are made for quiet, safe, reliable, get-it-done transportation. And the european performance cars are designed to perform and be fun to drive, and for that you give up reliability and cost efficiency. So you should select which function that you need - there is a market for both - but not usually from the same guy.
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Wed Apr 27, 2011 10:26 pm |
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switters
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I've actually heard Subarus aren't that reliable either... which is why I was considering the Hyundai Elantra Touring. It's a compact wagon that gets pretty good reviews and Hyundai has good reliability ratings on JD Power.
But I digress. I guess the main questions were: should I pay off my student loan, and should I take on any new debt to buy a used car or just buy what I feel comfortable paying cash for?
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Wed Apr 27, 2011 11:02 pm |
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